The month of April may have been somewhat better for the city of Sherman than was initially expected with regard to sales tax revenues. New reports and numbers show that the city saw a 5 percent sales tax revenue decrease in April — an improvement from the 16 percent which was initially reported for the month.
Last week, city officials said Sherman received initial numbers for sales tax earnings for the month of April that included a 16 percent sales tax revenue decrease for month when compared to April of 2019.
However, city officials said more detailed reports show that the majority of this was from corrections or other modifications from previous tax revenues.
"Once we took out a few one-time hits we were built into the numbers somewhere, we dropped down from about 16 percent to about 5 percent," Sherman Community and Support Services Manager Nate Strauch said. "We figured it would improve once we saw the detailed report, but to have it in the single digits is certain something great to see."
April’s loss was one-time adjustments
Strauch said about 11 percent of the loss seen in April was due to adjustments and corrections made to the city’s tax revenues and does not reflect the impact of the pandemic.
As an example, Strauch said this could involve a refund to businesses who overpaid on their sales taxes. In one case, Strauch said a construction company paid the wrong municipality for its taxes, and these funds were redirected to the correct city.
In another case, an audit ruled in the favor of the tax payer, and some funds were returned, Strauch said.
With these adjustments, Strauch said the month looked much closer to the numbers seen in March. While many businesses were closed and made no sales revenue, other retailers were able to make up much of this loss and saw an increase in taxes.
"The trends continued along the lines we saw in March, which is our top four retailers saw gains between 11 and 30 percent and a dozens of dozens of businesses dropped from whatever they made last year to zero due to the closures," he said.
The importance of the numbers
April’s numbers are serving as something of a bellwether for the effects of the COVID-19 pandemic, which closed many businesses for the entirety of April. Through this number, many cities hope to get a clear view of the full economic impact of the pandemic.
"We were looking at April as a major barometer for budgeting because it was going to give us the clearest picture that we’ve seen to date as to how the closures and virus affected our local economy," Strauch said.
Unlike April, March and May had days where many businesses were open, albeit with some restrictions. Meanwhile, April saw the height of closures due to the pandemic and could ultimately show the height of the pandemic and its impact to local businesses.
Leading into April, city officials were expecting a sales tax loss of up to 20 percent due to the pandemic. However, with the hit significantly lighter, Strauch said the city is more confident in its financial situation as it prepares to the 2020-2021 budget workshop next week.
Strauch said city officials are now expecting the city to see a 5 percent sales tax revenue decrease for the remainder of the year. City leadership will likely discuss what this will mean for the city going into the remainder of the year at the workshop.
"Because of where we are in the budgeting process, the city is going to have to make some firm decisions on what we want to spend next year even though we won’t know those receipts until closer to the fall," he said.
However, the new forecast has given the city enough confidence to relist some open positions. These positions were effectively frozen when the city went into a hiring freeze in March due to the financial uncertainty.
Michael Hutchins is the local government reporter for the Herald Democrat. He can be reached at firstname.lastname@example.org.